GM likely will seek smaller IPO sale

Jeff Kowalsky/Bloomberg NewsGeneral Motors' planned IPO could place more pressure on the government to win higher prices in future offerings.

General Motors will probably seek to raise $8 billion to $10 billion in an initial public offering in November, a smaller sale than the automaker originally targeted, said two sources familiar with the matter.

The Treasury Department, which owns 61 percent of GM, is more interested in fetching a higher share price to eventually recoup its $49.5 billion investment than in cashing out a bigger portion of its position, said the sources who asked not to be identified because the discussions are private.

A larger deal at a lower price would place more pressure on the government to win higher prices in future offerings, the sources said. GM and its investment banks have been considering a deal as large as $16 billion, people familiar with the plans said in August.

"They’re taking a more sober view," said Joe Phillippi, principal of AutoTrends Inc., a consulting firm in Short Hills. "The real question is what’s the price? There are questions in people’s minds about the market and the world’s economies."

Chairman Ed Whitacre, who handed CEO duties to Dan Akerson on Sept. 1, had favored an IPO that would sell as much of the government’s position as possible, the sources said. GM’s banks also sought a larger deal because it would generate higher fees.

Noreen Pratscher, a spokeswoman for Detroit-based GM, and a Treasury spokesman, Mark Paustenbach, declined to comment.

The department could offer as little as $6 billion in shares, though that is unlikely because the government and GM want investors to have more shares available for trading, the people said. Later offerings will be used to sell bigger portions of the government’s position, the sources said.

The size and price of the IPO are fluid and market conditions could change the offering significantly, the sources said. GM will split the stock to a price around $20 a share as is routine in many IPOs, one of the sources said.

China’s SAIC Motor, which runs a joint venture with GM in Shanghai, is likely to buy a stake of 1 percent or less, the two people said. SAIC would buy the shares to show support and firm up ties with GM. The Treasury Department wouldn’t be willing to sell the company more shares, the sources said.

GM said the government will own some common stock after its initial public offering, without specifying the number of shares or percentage of stock outstanding. The company added the disclosure last week in a re-filing of its S-1, the prospectus companies submit to register shares they want to sell.

GM said the Treasury will have the ability to "exert control, through its power to vote for the election" of directors as a result of owning some of GM’s common stock.

Morgan Stanley, JPMorgan Chase, Bank of America and Citigroup will lead the offering, according to the filing. Barclays, Credit Suisse Group, Deutsche Bank, Goldman Sachs, Royal Bank of Canada and UBS were also listed.